Sunday, May 03, 2009

May Day was good here in Lyon - luminous sunny weather, a nice lunch and walk with my friend Anais, and of course the marches all over France. They were bigger than the useful for 1ere Mai, and smaller than the earlier protest days during this winter of discontent.

Listening to my Sunday radio show, L'Esprit Public, Jean-Louis Bourlanges summed up a major current in the US as well as here in France by saying that the centrist leader Francois Bayrou addresses people who are "exasperated by inequality, by economic insecurity, and by the inability to have any confidence in their future, and yet who are unable to propose a solution." That's definitely where the press is these days, and leaders - completely stuck, and unable to provide any direction for people who have to work for a living.

And yet the conservative daily Le Figaro fretted on April 9th that in spite of the assurances of writers like Francis Fukuyama and Francois Furet, "the French Revolution may not be over." Max Gallo on the abovementioned show said the same thing: unions and parties are busy being moderate and negotiationist, while regular people are mad as hell.

Why is no big mystery. Their leaders screwed up royally, the economy is still going down, employment is getting crushed, retirement and financial cushions in the form of home ownership in the US and UK have lost 20% to 50% of their value in the past year, and leaders are doing much except attending to the care and feeding of wealthy bankers.

Just one small example of ongoing Hoover 2 - money to the top, little below: University of California president Mark Yudof told the Chronicle of Higher Education last week that the state of California calculated the federal stimulus payout to UC, cut their general fund by that amount, and then gave them the stimulus money - as zero.

The big stories this week were the celebration of May Day in America with the bankruptcy of Chrysler, another death knell for the industry that more than any other created the 20th century American economy, and the biggest quarterly GDP shrinkage in decades. And yet most of the press was thinking maybe the recession was bottoming out.

To help explain the stuckness of leaders, it's worth remembering via polls that give the Republicans twenty (20!) percent of the electorate that Republican rule was always minority rule. They brilliantly engineered short-term plurality coalitions for elections by exploiting right-wing majorities on compartmentalized issues (the Iraq invasion in 2002-04, for example). They had some good glue in anti-government sentiment and in genuine hostility towards elites based on real popular grievances like decades of economic stagnation and cultural condescension (a misreading of the problem of out-of-touch concentrated economic power, but nevermind). The Republicans got the judicial branch by controlling the executive branch through constructed pluralities that depended entirely on the illusion of prosperity, bought with cheap credit and the ruses of Republican trickster figures like Alan Greenspan. The Gingrich Congress of the 1990s was also a wedge Congress, combining authoritarian party discipline with total opportunism on issues (scrambling everything from closing the government by refusing to pass a budget to impeaching Bill Clinton for his blow-job cover up). But though smarter on strategy than the Dims by necessity, it was always a minority party. The weakness of the US economy is in part the weakness of the US top-down management system whose poor judgement nearly destroyed the financial system - until it figured out that Big Government was its new cash cow.

The Republicans are idiots so now we're again a one party state. Great. The Revenge of Mr. Rove.

Crisis history, anyone? Here's a good piece on Lehman and commercial real estate debt securitization. These guys weren't printing money. They were getting out their crayons and writing "1000 million dollars" on construction paper and then handing it over to investors. Then they collected 20 million dollar fees. Gillian Tett at FT has written a book about JP Morgan as the source of much of the 1990s theorizing, and had a good summary last week.